Resource Investor – by Pete Thomas
The People’s Bank of China and the Shanghai Gold Exchange (SGE) continue to move forward with the grand plan of making China the new world center for gold trading. Having covered the early steps in the post “The gold community sleeps, a giant awakens” we can now see the next important step. This is the ability to take and make delivery on the exchange.
We have the exchange (SGE) and the major bank (PBoC) collaborating so we now need the capacity to deliver the metal unhindered by taxes and too many regulations. The first of these current problems now being addressed is that The Peoples Bank of China will recognize qualified miners, as well as all the banks that are current members of the Shanghai Gold Exchange. This is a giant step forward as I know that Pamp/MTB is a member and I’ll tell you what that means in a moment. The barebones reality of what this means is they are trying to lure investors back home and also bring new funds onshore. This was further propagated by the Chinese regulators passing the “free trade zone act” in September of this year. If I’m right this should allow a seamless transaction for the conversion of Rinimbi through the coming futures contract which must happen to allow for foreign investment.
Right now the restriction has been raised to a $30 million USD cap of overseas money for a recognized importing miners but they will have to raise this rapidly to be successful, remember these are the first baby steps. As this progresses on the SGE I will be able to do cross collateralization, as I do in London, by buying physical gold and selling gold futures contracts as a hedge against the risk of price movement. Next year at the Singapore Gold Conference I plan to propose an Asian Gold Fix price which will fit in nicely for overall risk abatement.
With the primary monetary cap in place, people that represent some of the most respected Hallmarks stamps such a Pamp will be able to assist the exchange in the delivery of gold as the exchange converts currency into gold. So what is taking place is massive stability is about to occur in the Yuan as the exchange allows it to become a convertible currency in the world market.
All the pieces of the puzzle are starting to come together very nicely. The ICE exchange has stepped in and I’ll get you some info as to just how transparent this whole thing is about to become in the near future. It’s very exciting to watch the birthing of an exchange as a gold trader and I look forward to doing my first trades.
ABOUT THE AUTHOR
Pete Thomas of Zaner Precious Metals is an active cash and OTC metals broker for the last 35 years. He can be reached at 312.277.0140 or p.thomas@zaner.com.
http://www.resourceinvestor.com/2014/12/05/china-continues-to-move-forward